Paytm today announced that it will be expanding its collateral-free loans of up to ₹5 lakh at a low interest rate and daily repayment flexibility customised for micro-merchants in a bid to extend financial support to micro, small and medium enterprises (MSMEs).

The digital financial services platform is aiming to disburse ₹1,000 crore in loans by March 2021.

Bhavesh Gupta, CEO - Paytm Lending, said, “With our collateral-free instant loans, we are trying to help kirana stores and other small business owners who have been left behind by the traditional banking sector and do not have easy access to loans and credit. Going forward, we will especially focus on EDC merchants and provide higher loan amount based on their EDC transactions.”

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The fintech platform offers collateral-free loans under the ‘Merchant Lending Program’ in the Paytm for Business app.

The “credit-worthiness” of the merchant applying for the loan is determined by the platform’s algorithm. It determines this based on the merchant’s daily transactions to arrive at a pre-qualified loan offering.

The entire process, starting with the loan application, to approval, and to disbursal, has been digitised with no additional documents required. This is being done in partnership with NBFCs and banks.

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With no prepayment charges on these loans, repayment is primarily collected from the merchant’s daily settlement with Paytm.

In the last financial year, Paytm has processed loans worth ₹550 crore for more than one lakh merchant partners, it said.

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